The Hindu Business Line : Petrochem comes to Reliance rescue

The growth momentum was provided by the petrochemicals business, which had its fair share of challenges during the quarter in terms of a flat market for polymers and lower margins on fibres.

Refining Business

Roughly half of the earnings before interest and tax during the quarter came from the petrochemicals business with the refining business accounting for 41 per cent. The picture was the opposite during the second quarter of the previous year when the refining business accounted for half of the earnings before interest and tax while the petrochemicals business contributed 42 per cent.

Despite a 24 per cent rise in turnover from the refining business, profits before interest and tax fell by 3 per cent.

However, the petrochemicals business came to the rescue with profits growing by 38 per cent to compensate for the fall in refining earnings.

Retail Prices

Reliance adopted a conscious strategy of keeping retail prices of petrol and diesel higher than that of the Government oil companies, which helped it to transfer losses to the latter, but it also meant that its own market share would plummet.

The company was forced to export almost its entire production of diesel and petrol at prices that were not really remunerative.

This is reflected in the figure of exports of refined products, which shot up by 70 per cent during the first half to 8.76 million tonnes from 5.18 million tonnes in the same period last year.

Oil Prices

Margins in the refining business were under pressure consequent to the fall in overall gross refining margins to $9.1 per barrel from $10.4 per barrel in the same period last year.

The third quarter has begun on a positive note for the company with oil prices retracing to more manageable levels of around $60 per barrel.

But refining margins continue to be soft which means that Reliance's margins will remain under pressure.

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